Kenya: PMI plummets to a new record low in September as political uncertainties persist
October 4, 2017
The composite Purchasing Managers’ Index (PMI), produced by IHS Markit and Stanbic Bank, dropped to 40.9 in September, down from 42.0 in August, and further below the crucial 50-point threshold that separates expansion from contraction in private sector activity. The result marks a new record low in the survey’s history, signifying a persistent deterioration in business conditions.
Protracted political uncertainties around the presidential election re-run set for 26 October, exacerbated by intense infighting within the Independent Electoral and Boundaries Commission, are having a serious impact on economic activity. Output contracted for the fifth consecutive month, declining at the sharpest rate in nearly four years, due to plummeting demand and constrained money circulation. Consequently, new orders fell at the sharpest rate in the survey’s history.
Weak demand from overseas markets led to another month of falling export orders. As a result, firms again reduced their intake of additional staff, although the rate of jobs axed was reported to be marginal. Despite higher cost burdens from a sustained increase in the price of raw materials, firms continued to offer discounts in a bid to remain competitive and stimulate higher demand. The cap on commercial bank lending rates has compounded problems by diminishing the availability of credit, leading to negative spillovers to the wider economy.
Author: Nihad Ahmed, Economist